Measures shielding Canadian dairy industry under fire at U.S. NAFTA hearing

The issue could become a sticking point in upcoming NAFTA talks. As U.S. lawmakers launched salvos against Canadian supply management, Trudeau indicated he wasn't willing to upend a "system that works"

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The dairy sector was excluded from the original NAFTA deal in 1994, but the supply management system, which limits the amount of dairy that can be imported into Canada without high tariffs, has long been a point of contention

OTTAWA—Canadian measures to protect the dairy industry came under the microscope at a U.S. congressional hearing on revamping the North American Free Trade Agreement July 18, suggesting the Liberal government will have a tough time convincing legislators to look past the long-standing trade irritant.

“We want to end these discriminatory practices,” said Congressman Dave Reichert, the Republican chair of a House of Representatives subcommittee on trade that met in Washington, D.C., to discuss what they would like to see in a new NAFTA deal hammered out between the U.S., Canada and Mexico.

The Trump administration released a list of its broad goals for the NAFTA talks on Monday, which include expanded access to U.S. agricultural exports.

The 18-page document does not specifically mention the Canadian dairy industry, but said the U.S. wants to reduce or eliminating remaining tariffs, as well as try and get rid of non-tariff barriers to its agricultural exports.

The dairy sector was excluded from the original NAFTA deal in 1994, but the supply management system, which limits the amount of dairy that can be imported into Canada without high tariffs, has long been a point of contention.

A more recent dairy-related issue that also came up was a deal reached by the 12,000 dairy producers in Canada to sell milk proteins to domestic processors at a discount in order to further protect the industry from imports of cheap U.S. milk ingredients.

Ron Kind, a Democrat lawmaker from Wisconsin—the heartland of the U.S. dairy industry—said he does not want to jeopardize a crucial trading relationship with Canada.

But he also stressed things need to change.

“We need to be able to feel assured that whatever system we have is a fair and balanced one _ one that does level the playing field and right now, we don’t feel that is happening as it related to Canada,” Kind said at the hearing.

Stan Ryan, the CEO and president of Darigold Inc., a Seattle-based dairy processor, told the hearing that while it is important to make sure that the U.S. keeps its access to the dairy market in Mexico, Canada poses a challenge.

“NAFTA did not open up Canada the way it did Mexico,” he said.

When asked whether the U.S. has any leverage when it comes to pushing Canada to allow greater access to its markets for American dairy products, Ryan said it should be brought up in the NAFTA talks.

“I believe the leverage of the United States is ultimately one of the things, in a broader NAFTA negotiation, that the United States needs to stand up and say, ‘We’re standing on this issue,”’ Ryan said, who added that he believes the World Trade Organization will eventually rule against it.

“Do it right now, because it’s right and it’s what good trading partners should do,” he said.

Prime Minister Justin Trudeau appears unwilling to budge when it comes to supply management, which also protects eggs and poultry.

“It’s a system that works,” Trudeau said Tuesday during a visit to Perce, Que.

“We have signed significant trade deals with Europe, with North America, elsewhere, protecting our supply management system and we are going to continue to do that,” he said.

The Dairy Farmers of Canada issued a statement Monday saying that the sector should not be part of the renegotiation of NAFTA.

“Dairy wasn’t part of the first NAFTA agreement, and there is no valid new evidence to support that dairy be discussed in this round of discussions,” it said.

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